Strong earnings lift Research In Motion shares

BlackBerry sales results; forecast beats Street targets

By

DanGallagher

SAN FRANCISCO (MarketWatch) -- Research In Motion Ltd. shares flexed their muscles Friday, with the stock rising almost 11% after the maker of the BlackBerry line of smartphone devices reported third-quarter earnings that earnings more than doubled from the same period a year ago.

The results -- along with a better-than-expected forecast -- may help to lift a cloud that has gathered around RIM's
RIMM
stock. The shares had shed about one-quarter of their value in recent weeks amid worries about the potential effects of an economic slowdown and the credit crisis on Wall Street, home to some of the company's key customer base.

Investors cheered the results, sending RIM's shares up $11.64 to close at $118.63. Despite going through a recent dry spell, the stock has still more than doubled this year.

For the quarter ended Dec. 1, the company reported earnings of $370.5 million, or 65 cents a share, compared with earnings of $175.2 million, or 31 cents a share, for the same period last year.

Revenue doubled to $1.67 billion from $835.1 million last year.

The results were ahead of Wall Street's expectations. Analysts were expecting earnings of 62 cents a share on revenue of $1.65 billion, according to consensus estimates from Thomson Financial.

Following the report, Bear Stearns analyst Andrew Neff raised his rating on RIM's stock to outperform from peer perform, and also increased his target price on the stock to $170 a share from $150.

In a research note, Neff said RIM's report, as well as its outlook, suggest that anxiety over economic concerns and a potential slowdown in U.S. enterprise spending "overstates, in view of the secular phenomenon of smartphones."

Analyst Matthew Hoffman, of Cowen & Co., agreed with Neff's view of RIM and the maket for smartphones, saying that RIM's results "allayed fears" about weakening demand for its smartphones and other handsets.

"According to the company, enterprise spending, holiday consumer patterns and the financial [market] are all performing to expectations," Hoffman said in a research note, adding that the results suggest the mobile-phone market is "continuing to buck fears of a consumer slowdown."

Hoffman holds a neutral rating on RIM's stock.

RIM said it added about 1.65 million BlackBerry subscribers during the quarter, with more than 3.9 million devices shipped. Analysts had been expecting between 1.64 million to 1.7 million in new subscribers, according to brokerage reports.

The company managed strong subscriber growth despite pressures on consumers from the housing and credit markets. Consumers are a growing market for RIM -- the company said in a conference call Thursday that about 34% of its subscriber base is now "non-enterprise."

But the company maintained that it is still aiming at the corporate market.

"We continue to be very focused on growing our enterprise business," RIM co-CEO Jim Balsillie said on the call. "We believe that the enterprise market remains under-penetrated and that there are many opportunities for growth both in North America and markets around the world."

However, the company added that more than half its new subscribers in the recent quarter came out of the consumer market.

Forecast ahead of Wall Street's estimates

For the fourth fiscal quarter ending March 1, the company projected the revenue will come in the range of $1.8 billion to $1.87 billion. This is well ahead of the $1.75 billion projected by analysts, according to Thomson data.

Earnings are expected to come in between 66 cents and 70 cents per share, compared with analysts' current forecast of 65 cents per share.

On the conference call, RIM executives said they expect to ship more than 4 million devices in the current period. The company said that more than 40% of its current subscribers are using devices that are more than two years old, setting the stage for continued upgrades.

Though RIM has a large share of the growing smartphone market, the company faces strong competition from device makers, such as Samsung and Motorola
MSI, -0.07%
In the high-end consumer space, a key competitor is Apple Inc.
AAPL, -1.53%
with its popular iPhone.

Another rival, Palm
PALM, -0.67%
is faring less well. The smartphone maker reported its own results earlier this week, having swung to a loss for the November quarter on slowing sales and operational issues that delayed the launch of a key product and produced a rise in warranty repair expenses. See full story.

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